Pioneer success doesn't equal satisfaction for Fine

Phoenix-based Banner Health Network succeeded in Medicare's Pioneer Accountable Care Organizations program. But in an interview with Modern Healthcare Editor Merrill Goozner, Banner Health CEO Peter Fine questions whether the program will be successful in the long run. The leader of one of the nation's larger integrated delivery systems—Banner has 23 hospitals across seven Western states with 36,000 employees—also shares some controversial views on narrow networks, the growing competition between provider networks and his approach to lowering costs.

Modern Healthcare: What allowed your organization, unlike some others in the Pioneer ACO program, to succeed financially in year one?

Peter Fine: It was the recognition at the beginning that we had to focus our activities on the highest users—the highest 5%. We said cost savings are going to come from the most expensive people who are using the most services.

One year doesn't make a successful outcome. This is clearly an experiment. Some people dropped out and I expect more will. Long term, I don't think (the Pioneer) program will be successful (because) it is not an assignment model. I think everyone in this program would prefer people be in the Medicare Advantage plan. The only way you can reduce the level of care is to have a close relationship between the organization and the individual.

MH: You have formed narrow networks with some insurers. Are you worried patients may be alienated by restricted choices?

Fine: We bring 2,600 physicians and all of Banner's resources (to the network) … Narrow networks failed 20 years ago because the population at large did not want to have to make

choices. Over the last couple of decades, copays and deductibles and out-of-network fees have created financial incentives that encourage people to limit their options … Patients have to ask if they are willing to accept a narrow network to get a price point that is acceptable. If you don't do that, it's really hard to cut the cost of healthcare in this country.

MH: Do you foresee growing competition between networks or growing consolidation?

Fine: It will play itself out over the next five years. The pressures on healthcare organizations are primarily driven by governmental regulation and governmental budget cuts, state financial pressures and the movement toward putting significantly more responsibility for payment on the backs of individual people. It causes people to make different decisions about what they want to do with their dollars.

I'm not a big fan of the Affordable Care Act because I'm not sure it has been thought out properly. What it has done is stimulate the disruption of an industry … If you say to yourself that the cost-shifting methodology which you've used for years will disappear, which we believe, then you have to get your cost per unit of service down way below where it is today if you're going to maintain your financial viability. Consolidation? We'll see more of that by 2019 than we've seen in the last three decades. The pressures to get your costs at or below where Medicare is today have become enormous.

MH: What are your primary strategies for cutting costs?

Fine: We started in 2009, a multiyear journey, to take an organization as big as ours and figure out how to break even on Medicare. We took over two hospitals with 40,000 admissions, primarily Medicare hospitals, that weren't making money when we took them over in 2008. We took $3 million of overhead out overnight by consolidating … The only way those (acquisitions) become really valuable is if the leadership takes out duplicative administrative costs. Otherwise, their costs increase by their inability to make tough decisions. Once you develop that kind of culture, it allows you to do things that were previously restricted.

MH: Yet you also decided to cut back on your outsourcing. Why?

Fine: There were some things we thought were core and needed to manage close to the vest … We built a culture where it doesn't matter what the “it” is, everything depends on your willingness to evaluate everything, use data and move on it. That opens the door to critical analysis. Once you open that door, and you have good data, you will inevitably find a solution you previously didn't see.

MH: Did you face any roadblocks in getting buy-in from clinical staff?

Fine: The roadblocks there are always the independent mindset of the physicians. If you don't have good data, you can't influence that mindset. So you need an electronic environment and the ability to display it in a way that it can influence physicians … They tend to be scientists at every level. And if you present them with data, they will look for ways to improve clinical performance and get better outcomes. …

The difficulties are long-standing patterns of behavior in what clinicians do. We have a process under our chief medical officer that takes discreet areas of clinical care, creates consensus groups to evaluate them at great length and looks for best practice. When we identify best practice, we get approval through the process and we implement it through the whole system.

Physicians can opt out. But if they don't opt out, they're in.

Follow Merrill Goozner on Twitter: @MHgoozner